The group said on an underlying basis - excluding write-offs and one-off costs – replacement cost profit was $2.2 billion (£1.4 billion), which was ahead of analysts forecasts of around $1.5 billion (£1 billion).

Replacement cost profit is an oil industry accounting calculation which subtracts the cost of goods sold from total revenue.

This calculation, which BP is using to reflect Brent crude prices having dropped by more than half since June 2014 and accounting for a “near-term lower oil price environment”, dragged down profits in the last three months of 2014.

The replacement cost loss compares with a profit of 1.51 billion US dollars (£1 billion) BP booked for the same period the prior year.

On an annual basis, BP said replacement cost profits for 2014 were down 66 per cent to $8.07 billion (£5.37 billion) and by 10 per cent on an underlying basis to $12.14 billion (£8.08 billion).

Despite the fourth quarter loss, BP has announced a quarterly dividend of 10 cents (6.7 pence) per share, to be paid in March, and Dudley reiterated the dividend – a mainstay of UK pensions - “remains the first priority within our financial framework”.

Dudley said the focus “must now be on resetting BP: managing and rebalancing our capital programme and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations.”

The company said it is “now taking action to respond to the likelihood of oil prices remaining low into the medium term”.

BP plans to cut spending on exploration and postpone projects in its upstream business - which includes oil and natural gas field development, production, storage and processing – as well as mothballing some downstream projects, which includes refineries and manufacturing, fuel marketing and global oil supply.

The group said it will cut capital expenditure to around $20 billion (£13 billion) this year, which is down a fifth on prior guidance of between $24 billion and $26 billion (£15.9 billion - £17.3 billion).

BP also said it will also continue to divest assets, having offloaded $4.7 billion (£3.1 billion) since 2013, which is expected to double to $10 billion (£6.7 billion) by the end of 2015.

The company, which employs 15,000 people in the UK, announced in January it would cut 300 North Sea jobs following a review of its operations.

It added total cash costs for last year fell by more than $1 billion (£670 million) and it was "in action to deliver further efficiencies in 2015".

BP announced in December it planned to spend $1 billion funding a major restructure of its business globally by the end of the 2015 year which will include redundancies across all business segments.

The group also lost its latest challenge to a compensation deal linked to the 2010 Gulf of Mexico Deepwater Horizon disaster last December.

The group had agreed a compensation deal in 2012, but then launched an appeal arguing the terms set could lead to false and inflated compensation claims.

BP had initially estimated it would pay around $7.8bn (£6.1billion) to compensate those affected by the Gulf of Mexico spill, though no cap was set in the original settlement agreement.

To date, BP has set aside $43 billion (£27.6 billion) to cover claims.

BP said in the December announcement the restructuring bill reflects the need to downsize its operations as a result of asset divestments since the 2010 Gulf of Mexico disaster, and warned the rate of job losses across the UK and abroad will increase, with the focus likely to be on head office and back office roles rather than front-line operations.